(Reuters) - Boeing Co removed 210 aircraft from its order backlog and took an impairment charge over customer financing losses on Wednesday following the near-collapse of India’s Jet Airways.
The adjustment pushed the world’s largest planemaker behind European rival Airbus in the race for business this year as both companies grappled with cancellations that outweighed new orders in the first quarter.
Under recent changes in accounting rules, Boeing hives off orders that no longer meet its criteria for recognizing revenue into a separate category, while defending contractual claims.
As a result, Boeing net orders for the first quarter slid into negative territory, with a total of minus 119 net orders after cancellations, despite a slew of new wide-body sales.
Airbus posted a negative total of 58 net orders over the same period.
Boeing finance director Greg Smith confirmed the adjustment was related to financial problems at Jet Airways, which halted all flight operations indefinitely on April 17 after its lenders rejected a plea for emergency funds.
Reuters reported earlier on Wednesday that Boeing’s order adjustment, which initially emerged on a routine web page for orders and deliveries, came after Jet Airways stopped flying.
Boeing also posted a first-quarter operational loss of $707 million in a specific category grouping together certain unallocated items, compared with a loss of $326 million a year earlier. Overall, it posted a $2.35 billion operating profit.
“The change in earnings from other unallocated items and eliminations is primarily due to a customer financing impairment, higher deferred compensation expense and increased enterprise research and development investment,” Boeing said.
Industry sources say customer finance arm Boeing Capital is carrying 75 narrow-body orders on behalf of Jet in addition to 125 that the airline ordered directly from Boeing Commercial Airplanes.
There have also been doubts over a 10-year-old order of 10 wide-body 787s. At least one of Jet’s 787s has already been built, according to recent visitors to Boeing factories.
Reporting by Tim Hepher; Editing by Matthias Blamont and GV De Clercq
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